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Michael Kors will expand buy online, pick up in store

Luxury brand Michael Kors’ first foray into buy online, pick up in store proved so popular that it’s going to dramatically increase the number of stores where the service is available.

The retailer began offering what it calls “click-and-collect” service in 10 of its own stores in North America during the third quarter, CEO John Idol told analysts on the luxury brand’s fiscal third quarter 2017 earnings call. It’s a free service that allows shoppers to pick up online orders of select items at a store within three hours of placing the order. Shoppers pay when they arrive at the store. The service was such a hit with customers during its initial run that Idol says Michael Kors will be offering it in all of its U.S. retail locations by the end of March. A company spokeswoman says Michael Kors does not break out a specific U.S. store count. In the Americas region, which consists of the U.S., Canada, and Latin America, it has 397 total retail locations.

The company, which just reported declining sales and profits for its third quarter ended December 31, and for the first nine months of this fiscal year, is clearly hoping the click-and-collect program will help turn around these financial trends. “We view our store footprints as an opportunity for us to act as a distribution center,” he told analysts on the call, according to a transcript from Seeking Alpha. “We believe that further enhancing our omnichannel presence will help us to drive improved comparable sales results in the future.”

In fact, the company’s success with click-and-collect could be a prelude to same-day delivery initiatives in the future, Idol said.

“We have tests that are upcoming in the spring season on same-day delivery out of a number of locations,” he told analysts. “We want to [determine] what does a (store) footprint allow you to do in terms of service? We think service is going to be critical component of our long-term success as a brand, and also as an omnichannel retailer.” Michael Kors has 816 retail locations around the world, with 397 in the United States, Latin America and Canada.

Michael Kors, No. 375 in the Internet Retailer 2016 Top 500 Guide, does not break out online sales in its quarterly earnings reports. Idol told analysts that year-over-year e-commerce growth in North America was in double digits during the quarter.

With shopper preferences shifting to online from stores, Idol said the company plans to “significantly” ramp up its digital advertising efforts heading into the fourth quarter.

“We continue to see strong revenue growth from our initiatives in this channel as consumers shift their shopping behavior,” he told analysts. “We are also getting more profitable in our e-commerce business. It's still not where we want it to be (compared to) where we are in our retail stores, but it is getting more profitable.”

For the third quarter of fiscal 2017 ended Dec. 31, Michael Kors reported:

Net sales of $1.310 billion, down 2.4% from $1.342 billion during the same time the previous year.

Retail net sales in the Americas, including e-commerce, of $584.2 million, down 0.9% from $589.6 million.

Net income of $271.3 million, down 7.9% from $294.6 million.

For the first nine months of fiscal 2017, Michael Kors reported:

Net sales of $3.317 billion, down 1.7% from $3.376 billion last year.

Retail net sales in the Americas of $1.362 billion, down 0.7% from $1.371 billion.